Jim Armitage: The $1bn deal that has Schroders
looking down the barrel of a gun

Michael Dell should take out his iPad and watch The Artist, the 2011 Oscar winner

Decisions, decisions for the fund managers at Schroders Investment Management. Their quandary: do they or don’t they want to be shareholders in the company whose assault rifle was used to massacre 20 schoolchildren in Connecticut in December?

It’s a tough old question. Bushmaster, which advertises its wares with the slogan “Bushmaster offers everything you need to ensure the safety of you and your family”, was put up for sale immediately after that slaughter. Cerberus, the fund manager that owns it, decided it had better sell up sharpish after teachers whose pensions it was investing complained.

Among those expressing an interest in bidding is Sturm Ruger, a maker of similar weapons, in which Schroders is a major shareholder.

I suspect Schroders would give the $1bn bid its backing. It displayed a notable lack of squeamishness about guns ’n’ ammo in the days following the Connecticut massacre when, instead of sticking its head down and letting the fuss blow over, or even selling its 58,400 Sturm Ruger shares, it went on a buying frenzy, snapping up 140,000 more and taking it into the top 20 of shareholders.

Barclays and Flemings will also be paying attention to the Bushmaster auction. Their funds are in Sturm Ruger and in Smith & Wesson, which made the assault rifle used by James Holmes in his killing spree at a cinema in Aurora, Colorado, last year. 

Smith & Wesson has also expressed an early interest in bidding for Bushmaster. Perhaps it is hoping to pick up some design tips. Holmes’s Smith & Wesson jammed  mid-slaughter, and he had to switch weapons. In Connecticut, Adam Lanza’s Bushmaster didn’t.

... as the weapons bulls face a quandary

There’s a wider dilemma this week for those considering investing in guns-and-ammo shares. The Boston bombings sent Wall Street brokers firing off advice to clients to buy them. America is under attack. People will want to tool up.

Doubtless those action-movie images of rifle-wielding Swat teams will also get the gun nuts pulling the trigger on big purchases, too: “I want what that guy in the Kevlar’s got.”

Also backing the arms bulls this week was the refusal of senators to pass even the most minor revision to America’s gun laws. The right to bear machine-guns without background checks into one’s mental health continues to be enshrined in the constitution.

Smith & Wesson shares leaped almost 3 per cent in the immediate aftermath of that bit of good news. So why are investors in a quandary?

Firstly, gunmakers’ shares have risen hugely over the past couple of years, largely because of successful new marketing policies of the manufacturers and concerns about crime. That has left them looking pretty expensive, with little sign of what might drive them higher.

Meanwhile, sales have spiked since Connecticut as gun lovers stocked up their collections of assault rifles, fearing a ban. It’s now highly possible there will be a lull, as has happened previously after legislative action provoked people to stockpile .

More importantly, weapons investors fret about the overall spending cuts planned for the Pentagon’s defence budget. Estimates suggest Washington will chop about $13.5bn from America’s military adventures under the sequester. Much of that will come from reduced spending with the arms manufacturers.

Also, investors have to gauge whether reforms to gun laws will be back on the agenda in Washington soon. This latest law only failed by the narrowest of margins, and President Obama was clearly furious. It’s not hugely likely, I’ll admit, but we could see another, more concerted effort after the next massacre.

Be careful, Mr Dell – the PC has had its day

Michael Dell is not a man without ego. I’d wager it’s similar in size to his wallet. I’d also bet he is a happy man this weekend, having seen Blackstone walk away from bidding against him for the PC maker that bears his name.

However, I fear he may rue the day Blackstone packed its bags. While it means he’ll be able to buy back his old business for less now the competition has hopped off, it is hard to see how this takeover can bring anything but tears. Those close to Mr Dell and Silver Lake, his co-investor, will tell you Blackstone was never a serious bidder, having not done much in the way of technology takeovers of this size in the past.

But I can’t help thinking we should be taking notice of Blackstone’s worries, so succinctly put in its letter to the computing giant. It said it was pulling out because of  “the rapidly eroding financial profile of Dell” and the fall in the market for PCs by an “unprecedented” 14 per cent. That slide was “inconsistent with management’s projections for modest industry growth”.

Who can argue with that?

PCs are in inexorable decline. Tablets and smartphones will continue eating Dell’s core market. PC prices are tumbling, Dell’s cashflow is falling. These trends seem unstoppable.

This evening, Mr Dell should take out his iPad and watch The Artist, the 2011 Oscar winner about an egotistical silent movie star’s attempt to battle the talkies. Needless to say, the plan does not go well. Mr Dell should quit while he  is ahead.

Got to be wary on this pledge from Goldman

Lunched with one of the City’s most senior fund managers this week. He seemed a mild-mannered chap until I happened to mention Goldman Sachs, the US investment bank some know better as the Vampire Squid. The extent of his loathing was quite fabulous to witness and reminded me that the Goldmine has not had its usual run of bad press lately.

So I thought I’d better mention a sideline from this week’s profit figures. There’s a measure of the riskiness of their loans and investments known as Basel III that US investment banks will soon have to disclose by law. All the other Wall Street firms started disclosing the figure last year. But not Goldman.

Fortune magazine reports that an analyst asked on a Goldman conference call if it could at least say if its Basel III figure had risen or dropped. Answer came there none.

That’s an arrogant way to behave, especially given the growing concerns that banks are back making the same kinds of risky bets that blew up the world in 2008. A previous measure being phased out, known as Basel 1 – which Goldman does disclose –  shows its riskiness surging 20 per cent in the first three months of the year. It blames that on an accounting change by the regulator, but those of other banks jumped nowhere near as much.

Goldman says it is cutting its risk levels. We should be sceptical.

Start your day with The Independent, sign up for daily news emails
ebooksA special investigation by Andy McSmith
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

Ashdown Group: Junior Application Support Analyst - Fluent German Speaker

£25000 - £30000 per annum + benefits: Ashdown Group: A global leader operating...

Recruitment Genius: Evening Administrator

£8 per hour: Recruitment Genius: This Pension Specialist was established early...

Guru Careers: Executive Assistant / PA

£30 - 35k + Bonus & Benefits: Guru Careers: We are seeking an Executive Assist...

Ashdown Group: Graduate Application Support Analyst

£25000 - £30000 per annum + benefits: Ashdown Group: A global leader operating...

Day In a Page

Homeless Veterans campaign: Donations hit record-breaking £1m target after £300,000 gift from Lloyds Bank

Homeless Veterans campaign

Donations hit record-breaking £1m target after huge gift from Lloyds Bank
Flight MH370 a year on: Lost without a trace – but the search goes on

Lost without a trace

But, a year on, the search continues for Flight MH370
Germany's spymasters left red-faced after thieves break into brand new secret service HQ and steal taps

Germany's spy HQ springs a leak

Thieves break into new €1.5bn complex... to steal taps
International Women's Day 2015: Celebrating the whirlwind wit of Simone de Beauvoir

Whirlwind wit of Simone de Beauvoir

Simone de Beauvoir's seminal feminist polemic, 'The Second Sex', has been published in short-form for International Women's Day
Mark Zuckerberg’s hiring policy might suit him – but it wouldn’t work for me

Mark Zuckerberg’s hiring policy might suit him – but it wouldn’t work for me

Why would I want to employ someone I’d be happy to have as my boss, asks Simon Kelner
Confessions of a planespotter: With three Britons under arrest in the UAE, the perils have never been more apparent

Confessions of a planespotter

With three Britons under arrest in the UAE, the perils have never been more apparent. Sam Masters explains the appeal
Russia's gulag museum 'makes no mention' of Stalin's atrocities

Russia's gulag museum

Ministry of Culture-run site 'makes no mention' of Stalin's atrocities
The big fresh food con: Alarming truth behind the chocolate muffin that won't decay

The big fresh food con

Joanna Blythman reveals the alarming truth behind the chocolate muffin that won't decay
Virginia Ironside was my landlady: What is it like to live with an agony aunt on call 24/7?

Virginia Ironside was my landlady

Tim Willis reveals what it's like to live with an agony aunt on call 24/7
Paris Fashion Week 2015: The wit and wisdom of Manish Arora's exercise in high camp

Paris Fashion Week 2015

The wit and wisdom of Manish Arora's exercise in high camp
8 best workout DVDs

8 best workout DVDs

If your 'New Year new you' regime hasn’t lasted beyond February, why not try working out from home?
Paul Scholes column: I don't believe Jonny Evans was spitting at Papiss Cissé. It was a reflex. But what the Newcastle striker did next was horrible

Paul Scholes column

I don't believe Evans was spitting at Cissé. It was a reflex. But what the Newcastle striker did next was horrible
Miguel Layun interview: From the Azteca to Vicarage Road with a million followers

From the Azteca to Vicarage Road with a million followers

Miguel Layun is a star in Mexico where he was criticised for leaving to join Watford. But he says he sees the bigger picture
Frank Warren column: Amir Khan ready to meet winner of Floyd Mayweather v Manny Pacquiao

Khan ready to meet winner of Mayweather v Pacquiao

The Bolton fighter is unlikely to take on Kell Brook with two superstar opponents on the horizon, says Frank Warren
War with Isis: Iraq's government fights to win back Tikrit from militants - but then what?

Baghdad fights to win back Tikrit from Isis – but then what?

Patrick Cockburn reports from Kirkuk on a conflict which sectarianism has made intractable